If you put marketing under sales it will become its slave, losing all vision. If you put marketing under operations, it will become its slave and be turned into a strange service-and-support arm and focused on history. Under either, marketing will be driven to be totally tactical, its strategic role eliminated. Sales will focus marketing on the advertising, marcom, and sales support parts of marketing. Marketing’s product development role will suffer. Positioning will also suffer because marketing won’t develop the deep understanding of the product, how it is used by the customer, and what are its differentiable advantages. Products will slip into commodity quicksand and profits will erode. As the strategic understanding of products erodes, a company’s market position devolves into soda water marketing. This is where marketing is used to create pseudo-differentiators that do not exist.
Under this type of regime, marketing budgets for advertising and marcom swell and have little effect. The reason is that consumer marketing approaches are very costly because one is trying to create differentiation where differentiation does not exist. The difference between Coke and Pepsi are very subtle in taste. Coke creates its differentiation from the fact that it was first to market. So its tag lines have revolved around the theme of “it’s the real thing.” Pepsi inverts Coke’s point with tag line themes that point out that they are “the new generation.” Getting someone to buy your product over the other with this level of differentiation is very expensive, because it requires massive repetition to get the message to stick in the buyer’s mind.
In contrast, when you have a real differentiable advantage it is far easier and thus, far less expensive. Ferrari does no advertising. Ferrari dual purposes its R&D program (i.e. racing) to sell its product and to create differentiable advantage. Take Agilent Technology’s “we make your buses fly” tag line of a few years back. For a lot of very complex technical reasons, they were the only company that could test high speed buses at the time. The tag line along with the cartoon of a school bus with wings got the message across in a way that quickly burned itself into the buyers mind. More importantly it spoke the message clearly up and down the decision chain of the buyer. Customer CEOs understood it for what having one of Agilent’s testers would do for their sales. Test engineers understood it for how it would make their jobs easier. IBM and Intel also dual purpose their R&D efforts. When you think of these companies, you think performance and technology. In contrast, AMD has effectively chosen marketing approaches to exemplify its performance orientation (most recently by sponsoring Ferrari). It works, but it does reinforce the historical image that the company’s strengths are in marketing.
Operations typically turn marketing into its own sales arm, using it as a buffer between division management and the customer. The other issue here is that marketing’s role as perception cop will be eliminated. In this role, marketing continually provides a reality check of the organization, since most of an organization can’t be in the field. If marketing is folded into this internal organization — operations — its ability to say the emperor has no clothes will be greatly diminished. When it does, no one will listen and marketing will have no authority to play its role as change agent for the company. Products will be pushed into the market unfinished in order to meet schedules. The signs that this is occurring are that product managers spend most of their time with existing customers rather than new ones; they spend more time with the fun customers that shower praise on the company than with tough customers who complain to find out what the real problems are; and when it gets really bad you find that field problems are hidden, only popping up when a sale is about to be lost or has been lost. Another key warning sign of these types of problems is when you wonder why the rest of the world does not see the same thing as your few good customers. All the leading companies in our industry (ASML, Applied Materials, Novellus, Teradyne, Kulicke & Soffa, to name a few) insist that their senior people take on marketing roles and allocate their travel time according to market potential. If China is expected to be 30% of your business, they had better spend 30% of their travel time in China or find another job. If they’re spending half their time in Europe, they’re on an all-expense-paid paid vacation. Applied Materials is famous for having cracked both Japan and the Taiwanese market. Japan was cracked when many others had failed. Jim Morgan’s recipe was simple: he insisted that all his top people spend half their time in Japan until the entire organization understood the market and knew how to address it. If you spend any time on planes to Asia today, you will consistently run into the top executives of the companies above and many others in our industry as well.